Exhibit 10.7
EXCLUSIVE OEM/DISTRIBUTORSHIP AGREEMENT
This Exclusive Distributorship Agreement ("Agreement"), made and effective this
March 10, 1995, by and between Celerity Systems, Inc., a Tennessee Corporation
("Manufacturer or "Manufacturer") and InterSystem Multimedia, Inc, Distributor,
a New Jersey Corporation ("Distributor").
Manufacturer desires to appoint Distributor, and Distributor desires to accept
appointment, as an exclusive distributor of Manufacturer's products within a
defined area as set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and promises set forth
herein, the parties agree as follows:
1. Rights Granted.
Manufacturer hereby grants to Distributor, subject in all events to its
compliance with the other terms and conditions of this Agreement,
(i) the exclusive right to purchase, promote and sell Manufacturer's
products to Korea Telecom ("KT") for KT's use in the Republic of Korea (the
"Territory"), and
(ii) a co-exclusive right with Integrated Network Corp. to purchase,
promote and sell Manufacturer's products to other customers in the Territory for
their use in the Territory, and
(iii) a non-exclusive right to purchase, promote and sell Manufacturer's
products to customers in the rest of the world.
Each of the distributorships provided under (i), (ii) above shall be for
an initial term of three (3) years as provided for in Article 13. The
distributorship provided for under (iii) above respecting certain non-exclusive
worldwide rights shall be terminable by Manufacturer at any time by the giving
of a written notice which shall state a Date of Termination, which shall not be
any earlier than thirty (30) days after posting of such Notice in the U.S. Mail
by Manufacturer. On the Date of Termination all distributorship rights granted
under (iii) above shall forthwith terminate subject only to the continuing
obligation of the parties under Article 14A, B and C of this Agreement.
2. Products.
As used in this Agreement, the term "Manufacturer's Products" shall mean the
products, related service parts and accessories manufactured and/or sold by the
Manufacturer as follows:
CTL8000 Video Server product line consisting of:
M821 Motherboard & Chassis
C805 5 Channel T1 Board
D801 Disk Management Module including the software
S801 Supervisory Module including the software
M801 NTSC Module including the software
R75 Video Raid Subsystem
3. Terms of Sale.
All sales of Manufacturer's Products to Distributor shall be made pursuant to
this Agreement at such prices and on such terms as Manufacturer shall establish
from time to time on at least thirty (30) days notice. All prices are FOB
Manufacturer's plant. All orders shall be placed with Manufacturer on a Purchase
Order, the form of which to be supplied to Manufacturer by Distributor, and are
subject to acceptance by Manufacturer at its plant in Tennessee. Manufacturer
agrees to properly pack all items for shipment at Distributor's expense.
Distributor shall purchase insurance for shipping purposes as it might require.
Risk of loss due to damage or destruction of Manufacturer's Products shall be
borne by Distributor after delivery to the carrier for shipment. The shipper
will be selected by Manufacturer unless Distributor requests a reasonable
alternative. However, for the account of Korea Telecom, the prices and delivery
commitment made in the bid to be supplied to Distributor by Manufacturer and
incorporated into this Agreement (and incorporated prior to Distributor's bid to
KT) will remain firm and binding unless mutually agreed to change. This
Agreement shall control all aspects of the dealings between Manufacturer and
Distributor with respect to the Manufacturer's Products and any additional or
different terms in any Distributor order are hereby rejected. Manufacturer will
relabel the external product labels to the extent permitted by law to conform to
Distributor specifications provided, however, Distributor may choose one, and
only one, company name for the product without payment of an additional fee.
4. Payment.
For the account of KT, Distributor shall pay the same pro rata amount of all
charges due hereunder within fifteen (15) days after the Distributor gets paid
pro rata by KT (the normal KT payment policy, eighty percent (80%) of the
invoice amount will be paid upon presentation of shipping documents upon
completion of shipping and the remaining twenty percent (20%) after sixty (60)
days of reliability period from the official cut-over date by KT). For other
accounts, Distributor shall
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pay all charges due hereunder within thirty (30) days after the date of
Manufacturer's invoice. All payments shall be made in U.S. Dollars irrespective
of the form of payment to Distributor and Distributor shall assume all
risk/benefit of exchange fluctuations. Since Distributor is not able to make any
prepayment to Manufacturer, Distributor agrees to use its best efforts to help
Manufacturer acquire financing required to provide the products to be supplied
to KT.
5. Marketing Policies.
A. Distributor will at all times promote the sale of Manufacturer's Products
through all channels of distribution prevailing in its Territory, in conformity
with Manufacturer's marketing policies and programs respecting sales, marketing
or service. Distributor will use its best efforts in the Territory (i) to sell
Manufacturer's Products to aggressive, reputable, and financially responsible
dealers and customers, and (ii) to provide satisfactory consumer service.
Distributor is authorized to enter into written agreements with its dealers in
the Territory relating to the purchase, resale and service of Manufacturer's
Products on forms approved by Manufacturer for this purpose.
B. Distributor will use its best efforts to sell and promote Manufacturer's
Products under its non-exclusive worldwide distributorship and undertake to
assure and provide customer service wherever such sales are made so as to
preserve, protect and enhance the customers' impression of the quality and
dependability of Manufacturer's Products.
C. Distributor agrees that it will take all action reasonable and necessary to
prevent its dealers from selling Manufacturer's Products outside the Territory.
D. Distributor shall maintain a place of business in the Territory through a
local agent in such Territory. Distributor shall provide maintenance service on
Manufacturer's Products sold in the Territory, using qualified personnel and
subject to service policies reasonably satisfactory to Manufacturer.
E. Distributor shall hire sales personnel or appoint representatives to
introduce, promote, market and sell Manufacturer's Products in its Territory.
Such personnel and/or representatives shall be adequately trained by
Distributor. Distributor shall employ sufficient numbers of sales personnel
and/or representatives properly to market Manufacturer's Products in the
Territory.
F. Distributor agrees not to engage in the distribution, promotion, marketing or
sale in its exclusive Territory of any goods or products that directly compete
or conflict with Manufacturer's Products.
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6. Sales Policies and Merchandising Policies.
A. Sales quotas, giving reasonable regard to past performance and market
potential of Manufacturer's Products, may be established by Manufacturer from
time to time.
B. From time to time Manufacturer may at its option provide, at Manufacturer's
cost, Distributor with merchandising assistance in the form of advertising
programs, product and sales training and sales promotions. Distributor agrees to
use and integrate such assistance in carrying out Manufacturer's merchandising,
general merchandise and sales promotion policies.
7. Advertising Policies.
Manufacturer will cooperate with Distributor and its dealers, at Manufacturer's
cost, in providing for advertising and promotion of Manufacturer's Products
throughout the Territory. Nothing herein shall prevent Distributor from
independently advertising and marketing the Manufacturer's Products within the
Territory, provided the form and content of the advertising or marketing
materials are approved by Manufacturer in advance.
8. Product Warranty Policies.
LIMITED WARRANTY
Manufacturer represents and warrants the Manufacturer's Products are free of
inherent defects at the time of delivery to the carrier for shipment to the
Distributor. In the event any such defect is discovered, Manufacturer's
liability for such defect shall be limited at the option of Manufacturer to (i)
repair of the subject Product or (ii) replacement provided that all such
obligation shall terminate at the earlier of sixty (60) days after
Manufacturer's Product is put into service or one-hundred eighty (180) days
after date of delivery of Product to carrier; and further provided that
Distributor gives Manufacturer prompt written notice of any such defect and
cooperates with Manufacturer's investigation and handling of the matter. In the
event Manufacturer elects to provide replacement, Manufacturer shall not be
obligated to make such replacement prior to the time the defective Product has
been returned to its Tennessee manufacturing plant, suitably packed and sent by
reputable carrier. Cost of return shall be borne by Manufacturer. No other
returns will be permitted, allowed or credited without the prior written consent
of Manufacturer.
EXCEPT FOR THE WARRANTIES SET FORTH IN THIS AGREEMENT, MANUFACTURER MAKES NO
WARRANTY TO DISTRIBUTOR WITH RESPECT TO THE PRODUCTS, EITHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
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For the account of Korea Telecom, the Manufacturer agrees to accept the same
terms and conditions of the warranty requirement as set forth in the KT Contract
(Article 12.1 under Section 12. WARRANTY of Part II. TERMS AND CONDITIONS FOR
CONTRACT and Section 1.12 Warranty in PART III SPECIFICATIONS on Pages 26-27.
KT's IFT NO.: 95-PSC-006 dated Feb. 22, 1995) awarded by KT to the Contractor
(Distributor); provided, however, in no event will the warranty of Manufacturer
contemplated by the bid to KT be longer than eighteen (18) months after the date
of the Final Acceptance Certificate.
9. Liabilities and Indemnification.
A. Manufacturer's sole liability for Manufacturer's Products shall be repair or
replacement as provided in its Limited Warranty. Manufacturer shall not
otherwise be liable for any act or omission of any party and in no event shall
Manufacturer be liable for any consequent damages.
B. Distributor agrees to protect Manufacturer and hold Manufacturer harmless
from any loss or claim arising out of the negligence of Distributor,
Distributor's agents, employees or representatives in the installation, sale or
servicing of Manufacturer's Products or arising out of any representation or
warranty made by Distributor, its agents, employees or representations with
respect to Manufacturer's Products that exceeds Manufacturer's Limited Warranty.
Further, in the event that any of Distributor's dealers shall, with respect to
any of Manufacturer's Products purchased from Distributor, fail to discharge the
dealer's obligations to the original consumer pursuant to the terms and
conditions of Manufacturer's product warranty and consumer service policies,
Distributor agrees to discharge promptly such unfulfilled obligations.
10. Order Processing and Returns.
A. Manufacturer shall fill Distributor's order for the account of the KT in
accordance with the request of Distributor. Manufacturer will employ its best
efforts to fill Distributor's other orders promptly on acceptance, but reserves
the right to allot available inventories among distributors at its discretion.
B. Except for Manufacturer's Products that are defective at the time of sale to
Distributor, Manufacturer shall not be obligated to accept any of Manufacturer's
Products that are returned. In the event Manufacturer agrees to accept the
return of any product not subject to the Limited Warranty, Manufacturer may
impose a reasonable restocking charge.
11. Financial Policies.
Distributor acknowledges the importance to Manufacturer of Distributor's sound
financial operation and Distributor expressly agrees that it will:
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A. Maintain and employ in connection with Distributor's business and operations
under this Assignment such working capital and net worth as may be required to
enable Distributor properly and fully to carry out and perform all of
Distributor's duties, obligations and responsibilities under this Agreement.
B. Pay promptly all amounts due Manufacturer in accordance with terms of sale
extended by Manufacturer from time to time.
C. Furnish, at Manufacturer's request, a detailed reconciliation of
Manufacturer's statements of account with Distributor's records, listing all
differences, and showing net amount Distributor acknowledges to be due
Manufacturer.
In addition to any other right or remedy to which Manufacturer may be entitled,
shipments may be suspended at Manufacturer's discretion in the event that
Distributor fails to promptly and faithfully discharge each and every obligation
in this Section.
12. Use of Manufacturer's Name.
Distributor will not use, authorize or permit the use of, the name "Celerity
Systems, Inc." or any other trademark or trade name owned by Manufacturer as
part of its firm, corporate or business name in any way. Distributor shall not
contest the right of Manufacturer to exclusive use of any such trademark or
trade name used or claimed by Manufacturer. Distributor may, subject to
Manufacturer's policies regarding reproduction of same, utilize Manufacturer's
name, trademarks or logos in advertising on stationery and business cards.
13. Term and Termination.
Unless earlier terminated as provided below, the term of this Agreement shall
commence January 16, 1995 and shall continue until January 16, 1998. At the end
of the term, the Agreement shall continue until terminated by either party on at
least ninety (90) days prior notice.
A. Manufacturer may terminate at any time by written notice given to Distributor
not less than ninety (90) days prior to the effective date of such notice in the
event Manufacturer decided to terminate all outstanding distributor agreements
for Manufacturer's Products and to offer a new or amended form of distributor
agreement with substantially equivalent or better terms and conditions for
distribution.
B. Manufacturer may terminate this Agreement upon notice to Distributor, upon
any of the following events: (1) failure of Distributor to fulfill or perform
any one of the material duties, obligations or responsibility of Distributor in
this Agreement, which failure is not cured to the reasonable satisfaction of
Manufacturer within thirty (30) days of notice from Manufacturer; (2) any
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assignment or attempted assignment by Distributor of any interest in this
Agreement or delegation of Distributor's obligations without Manufacturer's
written consent; (3) any sale, transfer or relinquishment, voluntary or
involuntary, by operation of law or otherwise, of any material interest in the
direct or indirect ownership or any change in the management of Distributor; (4)
failure of Distributor for any reason to function in the ordinary course of
business; (5) submission by Distributor to Manufacturer of false or fraudulent
reports or statements, including, without limitation, claims for any refund,
credit, rebate, incentive, allowance, discount, reimbursement or other payment
by Manufacturer.
C. Manufacturer may terminate this Agreement if Distributor or Bescom does not
sign a contract with KT based on the prior bid provided to Distributor by
Manufacturer by July 1, 1995 upon thirty (30) day written notice.
D. Notwithstanding any other provision of this Article 13, Manufacturer may at
its option terminate the non-exclusive distributorship granted under Article 1
(iii) as provided in such Article 1.
E. Manufacturer may terminate this Agreement if Distributor (1) becomes
insolvent, (2) voluntarily or involuntarily files chapter 11 or bankruptcy, or
makes an assignment for the benefit of creditors, or ( 3) ceases to be actively
engaged in the selling of products or manufactures products for a period of
ninety (90) days or more.
F. For the account of KT, if this Agreement is terminated after the submission
of bid on April 4, 1995, the commitment made by the Manufacturer in terms of
price, delivery and the warranty will survive the termination if Bescom is
awarded the Contract by KT to supply the Manufacturer's Products as a part of
the overall system.
14. Obligations on Termination.
On termination of this Agreement, Distributor shall cease to be an authorized
distributor of Manufacturer and:
A. All amounts owing by Distributor to Manufacturer on thirty (30) days term
shall, notwithstanding prior terms of sale, become immediately due and payable
and amounts owing by distributor with respect to the account of KT will be paid
in accordance with paragraph 4 of this Agreement.
B. Distributor will resell and deliver to Manufacturer on demand, free and clear
of liens and encumbrances, such of Manufacturer's Products and materials as
Manufacturer shall elect to repurchase at a mutually-agreed-upon price, but not
in excess of Manufacturer's current price to
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distributors for such products and materials, provided that Manufacturer shall
not be obligated to pay Distributor for any item originally provided free of
charge.
C. Neither party shall be liable to the other because of such termination for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales, or on account of expenditures, investments, lease
or commitments in connection with the business or goodwill of Manufacturer or
Distributor of for any other reason whatsoever growing out of such termination.
D. For the account of KT, if this Agreement is terminated after the submission
of bid on April 4, 1995, the commitment made by the Manufacturer in terms of the
price, delivery and the warranty will survive the termination if Bescom is
awarded the Contract by KT to supply the Manufacturer's Products.
15. Use of Name Prohibited.
On termination of this Agreement, Distributor will remove and not thereafter use
any sign containing any trade name, logo or trademark of Manufacturer including,
but not limited to, "Celerity Systems, Inc.", and will immediately destroy all
stationery, advertising matter and other printed matter in its possession or
under its control containing such name, or any of Manufacturer's trademarks,
trade names or logos. Distributor will not at any time after such termination
use or permit any such trademark, trade name or logo to be used in any manner in
connection with any business conducted by it or in which it may have an
interest, or otherwise whatsoever as descriptive of or referring to anything
other than merchandise or products of Manufacturer. Regardless of the cause of
termination, Distributor will immediately take all appropriate steps to remove
and cancel its listings in telephone books, and other directories, and public
records, or elsewhere that contain the Manufacturer's name, logo or trademark.
If Distributor fails to obtain such removals or cancellations promptly,
Manufacturer may make application for such removals or cancellations on behalf
of Distributor and in Distributor's name and in such event Distributor will
render every assistance.
16. Acknowledgments.
Each party acknowledges that no representation or statement, and no
understanding or agreement, has been made, or exists, and that in entering into
this Agreement each party has not relied on anything done or said or on any
presumption in fact or in law, (1) with respect to this Agreement, or to the
duration, termination or renewal of this Agreement, or with respect to the
relationship between the parties, other than as expressly set forth in this
Agreement; or (2) that in any way tends to change or modify the terms, or any of
them, of this Agreement or to prevent this Agreement from becoming effective; or
that in any way affects or relates to the subject matter hereof. Distributor
also acknowledges that the terms and conditions of this Agreement, and each of
them, are reasonable and fair and equitable.
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17. Final Agreement.
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
18. Assignment.
A. Distributor understands and agrees that Manufacturer may at its option cause
its obligations under this Agreement for supply to Distributor and KT, if the
bid is accepted, to be assumed and performed by one or more third parties whose
principal function will be to finance the necessary materials and assembly
needed by Manufacturer for this purpose.
B. Neither this Agreement nor any interest in this Agreement may be assigned by
Distributor without the prior express written approval of Manufacturer, which
may not be reasonably withheld by Manufacturer at Manufacturer's sole
discretion.
19. No Implied Waivers.
Except as expressly provided in this Agreement, waiver by either party, or
failure by either party to claim a default, of any provision of this Agreement
shall not be a waiver of any default or subsequent default.
20. Notices.
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
by certified mail, postage prepaid, or recognized overnight delivery services.
If to Manufacturer:
Celerity Systems, Inc.
9051 Executive Park Drive
Knoxville, TN 37923
If to Distributor:
[M]
300 Sylvan Avenue
Englewood Cliffs, NJ 07632
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21. Governing Law.
This Agreement shall be construed and enforced in accordance with the laws of
the State of Tennessee.
22. Severability.
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
23. Headings.
Headings used in this Agreement are provided for convenience only and shall not
be used to construe meaning or intent.
24. Other Representations/Escrow.
1. Representations/Indemnity
a. Manufacturer hereby represents and warrants that to its knowledge,
after no inquiry, none of Manufacturer's Products violate or infringe upon any
United States Patents, Copyright or trade secret of any other person.
Distributor understands that Manufacturer has not undertaken or completed any
patent search of published U.S. Patents.
b. Distributor shall notify Manufacturer promptly of any claim, action, or
suit against Distributor arising out of the manufacture, sale or sublicensing of
the Products or the alleged infringement by the Manufacturer's Products of any
United States Patents, Copyright, or trade secrets or copyright of any third
party.
Manufacturer will indemnify Distributor against and hold Distributor
harmless from any and all loss, damage or liability assessed against
Distributor, or incurred by Distributor, arising out of or in connection with
any claim that:
(1) Manufacturer has breeched its representation under 24.1.a or
(2) or Manufacturer's Products incorporate one or more material
elements that constitute misappropriation of a trade secret
from a third party within the United States provided, however,
in any event that as a condition of such indemnity:
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(i) that Distributor notifies Manufacturer promptly and in
writing that any such claim is threatened or has been
brought and in no event more than twenty-one (21) days
after Distributor receives notice that such claim has
been brought,
(ii) that Manufacturer has the right to assume the defense of
such claim, with counsel selected by Manufacturer,
(iii) that Manufacturer receives Distributor's full and
complete cooperation at Manufacturer's expense in the
defense of such claim, and
(iv) that Manufacturer shall have the right to settle such
claim and/or procure the right to continue the
manufacture and sublicensing of the Product as
contemplated hereunder, and/or modify the Product in
such a fashion as to eliminate any infringement and
misappropriation (without effecting the capability or
performance) and thereby discharge its obligations
hereunder.
Manufacturer shall have no obligation hereunder with respect to any
proceeding or claim of infringement based on Distributor's modification of the
Products provided by Manufacturer hereunder or the combination, operation or use
of such Products with program(s) and procedures not furnished by Manufacturer,
if such infringement claim would have been avoided in the absence of such
modification, combination or operation or use with program(s) not furnished by
Manufacturer.
2. Escrow
a. Distributor acknowledges that the Source Code used in creating
Manufacturer's Products, together with the Object Code incorporated in such
Products, are the proprietary, confidential trade secrets of the Manufacturer.
The Source Code of the "Manufacturer's Products" will be kept by a reputable
Escrow agent to be appointed by Manufacturer and deemed acceptable by
Distributor. The Source Code in Escrow will be released to Distributor by the
Escrow agent if Manufacturer (1) becomes insolvent, (2) files chapter 11 or
bankruptcy, or (3) ceases to do business. Distributor shall receive the Source
Code in the event of delivery under Escrow as a "bailment" solely for the
purpose of maintaining the equipment sold to KT and will be strictly liable for
any other use or disclosure of the confidential information regarding such
Source Code.
25. Warranty Service for KT
For the account of KT the Contract with KT requires warranty service for twenty
(20) months from the date of official cut over of the system installed or
eighteen (18) months from the date of the
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issuance of the Final Acceptance Certificate by KT (Refer to the Article 12.1
under Section 12. WARRANTY of Part II: TERMS AND CONDITIONS FOR CONTRACT and
Section 1.12 Warranty in PART III: SPECIFICATIONS on Pages 26-27: KT's IFB NO. :
95-PSC-006 dated Feb. 22, 1995). Manufacturer agrees to provide or make
available such warranty service through Distributor at no extra cost to
Distributor.
During any installation of Manufacturer's Products at KT's Central Offices in
six cities and until successful official cut over of the system to KT,
Manufacturer will provide, at Manufacturer's cost and expense, all necessary and
appropriate on-site technical support to ensure successful installation.
Distributor agrees to cooperate will all reasonable requests of Manufacturer for
all on-site support, including personnel who can observe and learn how to
provide emergency on-site service in the future.
Manufacturer agrees to send two (2) expert engineers to KT for two (2) months to
be present at the Yoido installation site in Seoul during the sixty (60) day
reliability period as required by the terms and conditions of the Contract
(Article 1.11.14 under Section 1.11 Cut-Over and Acceptance Testing in PART III:
SPECIFICATIONS on Page 26: KT's IFB NO.: 95-PSC-006 dated Feb. 22, 1995) at
Manufacturer's own expense.
26. Schedule and Liquidated Damages for Korea Telecom Contract
As to the Manufacturer's Products for delivery to KT under the bid to be
submitted to KT by the Distributor (the "Bid"), the KT Bid document clearly
states (Article 11.1 under Section II, LIQUIDATED DAMAGES in PART II; TERMS AND
CONDITIONS FOR CONTRACT, KT's IFB NO.: 95-PSC-006 dated Feb. 22, 1995) that the
Contractor, in our case Distributor, will be subject to a penalty for (i) any
delay in delivery of the system to KT or (ii) failure to pass a required Systems
Acceptance Test. Both parties recognize and agree that Manufacturer's Product is
one of several components in the system subject to the KT Bid and that
Manufacturer's obligation to Distributor in regard to a failure to deliver or
meet the SAT by certain dates in the Bid should be limited to delays caused
solely by Manufacturer's failure in these matters. Accordingly, Manufacturer
agrees to pay its pro rata share of any penalty imposed by reason of a failure
to meet a delivery date or pass the SAT (as required in either case by the
accepted Bid), such pro rata share to be equal to the amount of delay or failure
to pass SAT attributable to Manufacturer's Product as compared to the total
delay or failure to pass SAT caused by all components of the system; provided,
however, in no event will Manufacturer be liable for an amount equal to more
than one-tenth of one percent (0.1%) per day of the amount of the KT contract
attributable to the system applied by Manufacturer. All such amounts shall be
payable by Manufacturer to Distributor only to the extent Distributor has
actually paid KT (as evidenced by documentation) and shall not constitute any
independent obligation to KT by Manufacturer to any party other than
Distributor.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Celerity Systems, Inc. InterSystem Multimedia, Inc.
By: /s/ Glenn West By: /s/ Hoon Yang
-------------------------------- ---------------------------
Glenn West Hoon Yang, Ph.D.
Director, Technical Operations President & CEO
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